AP Microeconomics - 2.3 - Price Elasticity of Demand

The price elasticity of demand measures the:

• responsiveness of quantity demanded to a change in quantity supplied.

• responsiveness of price to a change in quantity demanded.

• responsiveness of quantity demanded to a change in price.

• responsiveness of quantity demanded to a change in income.

Price elasticity of demand is defined as:

• the slope of the demand curve.

• the slope of the demand curve divided by the price.

• the percentage change in price divided by the percentage change in quantity demanded.

• the percentage change in quantity demanded divided by the percentage change in price.

Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.

• elastic

• unit elastic

• inelastic

• independent

Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.

• independent

• inelastic

• unit elastic

• elastic

Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

• elastic

• unit elastic

• inelastic

• independent

The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in __________.

• quantity supplied

• the slope of the demand curve

• price

• the slope in the supply curve

When demand is inelastic:

• price elasticity of demand is greater than 1.

• consumers are not very responsive to changes in price.

• the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price.

• demand curves appear to be fairly flat.

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?

• 0.15

• 3.0

• 0.10

• 0.05

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:

• rise and the equilibrium quantity to fall.

• rise and the equilibrium quantity to stay the same.

• rise and the equilibrium quantity to rise.

• stay the same and the equilibrium quantity to fall.

If the demand curve is perfectly elastic, then an increase in supply will:

• decrease the price but result in no change in the quantity exchanged.

• increase the quantity exchanged but result in no change in the price.

• increase the price but result in no change in the quantity exchanged.

• increase both the price and the quantity exchanged.